Cost pressure easing for cement companies

Cost pressure easing for cement companies
16/04/2019 , by , in ALLIED

The good news for cement makers is savings from lower input costs, which would show from the March quarter.

Imported petroleum coke (petcoke) prices declined by around 20% from the recent peak in August 2018. Similarly, domestic petcoke and international coal prices have eased.

As a result, power and fuel cost would soften by ₹17.10 a tonne sequentially, according to JM Financial Institutional Securities Ltd. Year-on-year, savings for cement companies would be about ₹54.50 per tonne, it said in a note on 15 April.

But the good news ends there. A larger concern is whether the revival in cement prices will persist.

As feared, the steep cement price hikes announced in early March failed to take hold in most parts of the country. Inadequate demand growth was no match for excess capacity and weighed on prices. Dealer channel checks by Kotak Institutional Equities showed cement prices dipped in many regions, barring the south and the east.

In March, all-India cement prices averaged ₹334/bag. One cement bag weighs 50kg. Still, cement companies continue to drive price increases in certain pockets. Media reports state that cement prices were hiked in some metros by ₹25-30/bag in April as rural cement demand picked up. For now, realizations for cement companies may rise by 2-3% quarter-on-quarter, especially for south-exposed companies, said analysts.

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